Point-of-Purchase Remains a Healthy Business
by Thomas Franklin
Part 2 of a 4-part exclusive online series
While the Internet benefits from the buzz, more traditional forms of marketing continue to flourish under the radar. Point-of-purchase display graphics, the mainstay of retail marketing, are expected to enjoy strong growth through 2010.
"We still see a very healthy market for POP signage, especially digital signage," says Patti Williams, consulting partner, I.T. Strategies.
According to InfoTrends, the total retail value of POP displays in the U.S. hit $20.7 billion in 2006, of which roughly $4 billion was digitally printed wide format POP. Worldwide, I.T. Strategies estimates that the retail value of digitally printed POP hit $8 billion this year.
InfoTrends is predicting healthy growth in the POP segment through 2010 when retail values for the total category and the digitally printed sub-segment will reach $27 billion and $6 billion, respectively. The total POP market will enjoy a compound annual growth rate (CAGR) of 6.8 percent through 2010 and wide format digital will experience a CAGR of 9.3 percent, outpacing the overall market thanks to the ability to produce shorter runs and more innovative displays, like floor graphics, says Tim Greene, wide format research director, InfoTrends.
According to Williams, POP owns 42 percent of the $20 billion market for indoor graphics, making it the single largest application. As such, itís a very mature market. "Every shop at some point produces some point-of-purchase," Williams states. Whatís new is the shifting dynamics in the technology, with digital printers gobbling up market share from screen printers, she adds.
"Digital continues to grow both incrementally, at the expense of screen printing," and additively by expanding the total market for POP with unique applications like floor decals and customized wall paper, says Williams. In a recent report authored by I.T. Strategies, the firm notes that even if a downturn in overall POP advertising spending should occur, "wide format inkjet graphics used for POP applications can continue to grow" by swallowing screen printed business.
Most POP printing ($6.1 billion worth on a world wide basis) is done on aqueous printers, making it the top indoor aqueous application, Williams says. Similarly, POP is the leading UV application for indoor prints although it accounts for a vastly smaller dollar value at $830 million. That will change over time, Williams predicts, as UV technology ramps up.
The health of the POP market is intimately tied to overall ad spending which, in turn, is usually tied to the health of the U.S. economy. With regards to the former, ad spending was up 4 percent during the first half of 2006 versus the year before, according to the market research firm TNS Media Intelligence. Total ad dollars rang up $73 billion for the survey period. The financial firm UBS expects ad spending to grow 3.7 percent in 2007.
While U.S. GDP growth has been robust since 2003, the U.S. economic picture is more mixed going forward. GDP growth slackened in the third quarter, yet unemployment remains at near-record lows and the Dow has climbed to record highs. If the economy sags and ad dollars fall, the POP market will follow other forms of advertising and soften. But if the economy holds, POP should continue to thrive, states Riley McNulty, research manager, IDC.
The other serious rival to printed POP displays is digital signageótypically flat panel displays with variable content. However, this will take many years to ramp up, making traditional POP relevant for many years, McNulty says. "Digital might work for some brands and for some retailers, but itís more likely to have an impact outdoors before it impacts indoor displays," he adds. Besides, the infrastructure and costs associated with maintaining a digital sign in a mass market retail environment is too onerous for most retailers. "All it takes is one kid to put their hands on it or someone to drop their coffee on it," McNulty concludes.